The West

Forrest plans FMG share buy
Forrest plans FMG share buy

UPDATE 10am: Andrew Forrest was last night planning to splash $294 million on Fortescue Metals Group shares in the hope his show of confidence in the iron ore miner may breathe life into its share price.

Morgan Stanley has been appointed sole book runner on an "all or nothing" basis to buy 60 million Fortescue shares at $4.90 each.

The broker's term sheet did not disclose the proposed buyer, however, this morning a change of director's interest notice on the ASX showed Mr Forrest had spent $62 million acquiring 12.8 million shares in the company between June 20-25 at an average price of $4.85 a share.

At 10am, FMG shares were off one cent to $4.84.

The shares have struggled to break through the $5 barrier after plummeting from above $6 in mid-April to as low as $4.31. The shares were worth $7.27 at the start of last year.

A source last night said "it's not going to be easy" to fill the order. The order equates to 1.9 per cent of Fortescue's issued capital.

Mr Forrest, Morgan Stanley and Fortescue declined or could not be reached for comment. If the order is completed, it would mark Mr Forrest's biggest single purchase of Fortescue shares since he founded the company.

The chairman already controls a 31.5 per cent stake of Fortescue worth $4.76 billion. Almost $100 million of those shares are held by Mr Forrest as part of a financing scheme under which he buys stock on behalf of certain unnamed company executives.

The outlook for the iron ore market has divided investor opinion. Some are in line with BHP Billiton, which has taken a decidedly cautious approach to the metal on the back of its subdued outlook for China's economic growth.

Others, such as Rio Tinto which last week approved a further $US6.2 billion ($6.2 billion) in its Pilbara and Guinea units, remain bullish.

There is also a view among some investors that BHP's reluctance to push ahead with an outer harbour at Port Hedland, thereby limiting its iron ore production capacity, will benefit Fortescue, which is in the throes of trebling its Pilbara output.

Fortescue often is the subject of short sellers. Two months ago, prominent US hedge fund manager Jim Chanos labelled the miner a "value trap" and said he was betting against it, angering Mr Forrest.

The West Australian

Popular videos